Canada's leading retailers: latest trends and strategies for their major chains

Canadian Journal of Regional Science, Autumn, 2006 by Ricardo Gomez-Insausti

Abstract

Leading retailers in Canada have developed strategies of integration, acquisition and market penetration that have resulted in a higher level of capital concentration within the retail sector. Over recent years, large retailers have increased their competitive advantage and, consequently, their market dominance through the development of new retail formats across the country. The investment strategies of the largest retail players affect the spatial organization of many businesses. Their locational preferences towards specific retail environments have an impact on the locational strategies of the smaller players. Some powerful retailers focus chain development on major markets where they establish their new formats while other players are moving away from the largest urban agglomerations to concentrate their investments in smaller markets. The paper assesses market concentration and locational preferences among leading retailers by retail sub-sector and market size.

Resumes

Les principaux detaillants au Canada ont developpe des strategies d'integration, d'acquisition et de penetration du marche qui ont resulte en un niveau superieur de concentration du capital au sein du milieu de la vente au detail. Au cours des dernieres annees, les grands detaillants ont augmente leur avantage competitif et, consequemment, leur dominance du marche a travers le developpement de nouveaux formats de vente au detail a travers le pays. Les strategies d'investissement des plus gros joueurs du detail affectent l'organisation spatiale de plusieurs entreprises. Leurs preferences de localisation vis-a-vis des environnements de vente au detail specifiques ont un impact sur les strategies de localisation des plus petits joueurs. Certains detaillants puissants mettent l'emphase sur le developpement en chaine sur des marches majeurs ou ils etablissent leurs nouveaux formats tandis que les autres joueurs quittent les plus grandes agglomerations urbaines afin de concentrer leurs investissements dans de plus petits marches. L'article evalue a l'aide de sous-secteurs et de la taille du marche la concentration du marche et les preferences de localisation parmi les detaillants principaux.

Introduction

The paper analyzes the latest strategies of growth carried out by Canada's leading retailers. It addresses the reorganization of retail capital that emerged from recent consolidation processes, in particular in the fashion sector. The concentration of retail capital into the domain of a few corporations is an ongoing process in Canada. The urge to merge became a widespread phenomenon in the 1990s but still prevails in the country's retail economy. Large retailers have been growing faster through the incorporation of existing networks rather than by the development of new chains. Although mergers and acquisitions in Canadian retailing have slowed down in pioneer sectors such as department stores, food, bookstores and, to some extent, home improvement, they are escalating in the fashion sector.

Post-acquisition policies of divesting from unproductive stores/chains in addition to the general trend of increasing store size and reducing the number of locations have modified the way that retailing is organized over space. Restructuring and integration processes that large retailers develop have tremendous impact on retailers, developers and consumers. Small retailers face stronger competition; mall developers confront higher vacancy rates and demand for larger spaces; and consumers travel further distances to reach the new retail formats in the suburbs or in specialized retail strips.

In order to shed some light on the current reorganization of retailing in Canada, this paper focuses on three aspects of the country's leading retailers: their profile and strategies; their market concentration; and, the remaking of their retail networks.

Leading Retailers' Profiles and Strategies

The classification of firms as Canada's leading retailers is based primarily on the sales ranking of those retail conglomerates generating over 100 million dollars a year in sales revenue. A series of financial and locational information has been systematically gathered for these firms since 2000. (1) Complete financial information on these firms is collected annually; therefore, the figures that are used in the analysis are for the latest year available for all the firms under study. Only automotive and government retail businesses are excluded from this collection and analysis.

Data for 2003 retail sales indicate that 94 corporations, controlling about 330 chains, contribute to over 78% ($149.2 billion) of the non-automotive total sales ($190.8 billion). Canada's leading retailers do the bulk of the retail activity and serve a variety of regional markets and social niches. Most of their networks are focused on the country's major markets where innovative and more efficient store formats can easily reach their critical mass of customers. Retailers concentrate operations in the four provinces that include the country's largest cities: Ontario, Quebec, British Columbia and Alberta (Simmons and Kamikihara 2005).